Cedar Rapids spending on flood control, economic development despite $2.5 million gap from state error

Editor’s note: This story was updated to reflect that an infrastructure engineer role initially planned in the budget was excluded because of the police traffic camera project that was put on hold. It also clarifies that the city is not leaving vacancies unfilled, but used fiscal 2023 savings resulting from vacancies to balance the budget.

CEDAR RAPIDS — Now that Iowa lawmakers have passed a bill to fix a state error, leaving local governments down millions in expected revenue as they set their budgets for the 2024 fiscal year, the city of Cedar Rapids has identified which programs and projects to scale back while investing in key priorities.

For fiscal 2024 — the budget year spanning July 1 through June 30, 2024 — Cedar Rapids is planning for more investments in economic development and flood control, despite drafting the budget “under difficult circumstances,” City Manager Jeff Pomeranz said in a city council budget session Monday.

The city will balance the budget by using savings resulting from staff vacancies in the current budget year, cutting back on capital equipment spending and delaying two public safety and parks projects.

While the bill correcting the state’s error results in a savings for taxpayers, it leaves local governments scaling back public services they had planned. The Iowa Department of Revenue erroneously calculated the rollback rate, which is used to determine how much of the value of a property is subject to property taxes.

In Cedar Rapids, the rollback error will leave the city short an estimated $2.5 million in revenue. In response, the following changes were made to the budget:

Additionally, some projects may be paused and removed from the budget pending the end of the current fiscal year and potential legislative changes:

What’s the tax rate?

To help fund the city’s permanent $750 million Flood Control System, the budget includes an increase in the property tax levy rate of 22 cents per $1,000 of taxable property valuation.

Overall, property owners would see a city tax rate of nearly $16.25 per $1,000 in taxable value.

The city’s rate is lower than the property taxes levied by Waterloo, Council Bluffs, Davenport and Des Moines, but higher than Iowa City and Sioux City.

Total assessed property value in fiscal 2024 is $13.6 billion — an increase of 4.5 percent or $586.7 million from the current fiscal year. Of this increase in valuation, $31.2 million, or 6 percent, is related to tax increment financing development areas.

Total taxable value will rise by 4.63 percent to $7.6 billion — an increase of $334.2 million. Residential property showed the biggest increase of $411.1 million, or 9.44 percent. But the correction of the state rollback error will affect these figures.

General fund

Without accounting for the state rollback error, the total general fund revenue and expenditure budget — which funds police and fire, parks and recreation and public works — is $157.9 million, an increase of 7 percent or $10.9 million from fiscal 2023.

The general fund budget allocates $250,000 to grow sustainability programs, such as piloting an e-bike voucher program. It will add full-time equivalents for a fire position to reduce response times for building plan reviews and a security architect for Information Technology systems.

Additionally, the general fund bump will support a $1 to $3 wage increase for Parks and Recreation seasonal workers, more money for entertainment venues such as the McGrath Amphitheatre, and $390,000 for economic development programming.

Pomeranz said the city will look to be more active in business recruitment and retention.

The budget maintains $46 million in reserves — 29 percent of the fiscal 2024 annual operating budget — by June 30, 2024.

The Federal Emergency Management Agency and National Resources Conservation Service still owe Cedar Rapids a combined total of about $40 million in reimbursements for costs related to recovery from the 2020 derecho, Pomeranz said.

Interim Finance Director Heidi Stiffler said city staff expect that by the end of 2024, Cedar Rapids will have been fully reimbursed.

Utility rates

Cedar Rapids’ utility rate will increase 6 percent. That’s about $82.80 annually for the typical residential customer.

According to the city, this increase largely will fund operations and capital improvement projects for water, water pollution control, stormwater and sanitary sewer.

The residential rate for solid waste and yard waste collection will decrease by 1 percent.

What’s next?

The city held a public hearing at the council’s Tuesday meeting to adopt the maximum property tax levy. A public hearing and council adoption of the budget will take place April 25.

Comments: (319) 398-8494; marissa.payne@thegazette.com